SBA Disaster Loan, Including Economic Injury Disaster Loan (EIDL), FAQ

Blog
March 23, 2020

Last Updated: Tuesday, March 24, 2020, 10:23 AM

According to the Small Business Administration (SBA) Administrator, Jovita Carranza, “The President took bold, decisive action to make our 30 million small businesses more resilient to Coronavirus-related economic disruptions. Small businesses are vital economic engines in every community and state, and they have helped make our economy the strongest in the world. Our Agency will work directly with state Governors to provide targeted, low-interest disaster recovery loans to small businesses that have been severely impacted by the situation. Additionally, the SBA continues to assist small businesses with counseling and navigating their own preparedness plans through our network of 68 District Offices and numerous Resource Partners located around the country. The SBA will continue to provide every small business with the most effective and customer-focused response possible during these times of uncertainty.”

Aronson, LLC, has been tracking frequently asked questions around the SBA Disaster Loan program amongst our clients and will continue to update this blog whenever updates are available:

  • What are the types of Disaster Loans available?
    • Home and Personal Property Loans
      • If you are in a declared disaster area and are the victim of a disaster, you may be eligible for financial assistance from the SBA, even if you don’t own a business.
    • Business Physical Disaster Loans
      • Any business or organization located in a declared disaster area and that incurred damage during the disaster may apply for a loan to help replace or restore damaged property.
    • Economic Injury Disaster Loans
      • If you are in a declared disaster area and have suffered economic injury regardless of physical damage, you may qualify for an Economic Injury Disaster Loan (EIDL).
    • Military Reservists Economic Injury Loans
      • If you have an essential employee who is a military reservist called to active duty, SBA provides loans to help eligible small businesses with operating expenses.
  • What locations in Washington, D.C., Maryland, and Virginia are currently able to access Economic Injury Disaster Loans?
    • All jurisdictions in Washington D.C., Maryland, and Virginia are eligible to apply for the Economic Injury Disaster Loans (last updated 3/23/2020).
  • How does this the Disaster Loan program differ from other SBA Programs?
    • The Disaster loan programs are administered & underwritten directly by the SBA.
    • More commonly used SBA loans can be underwritten by banks & can be used for various business purposes.
    • Contact your bank about these additional SBA programs to determine if they’re a good fit for your business:
  • How do I apply for Disaster Loan, specifically an Economic Recovery Loan with my bank?
    • You do not apply for these loans with your bank. These loans are administered directly by the SBA.
    • Apply for the loan with the SBA in one of these three avenues: 1) online; 2) in-person at a disaster center; or 3) by mail. More information here.
  • Is this my only option to access short term working capital?
    • No, there are many lenders looking to provide resources, including leveraging your existing banking relationship to identify debt or alternative treasury management practices.
    • If you have questions about managing working capital and liquidity contact us.
      • Consider first performing an analysis of your fixed vs. variable costs, determining your 30, 60 and 90 day cash flow forecasts, managing accounts payable and accounts receivable, and also perform an analysis over the impact of COVID-19 on your immediate revenue forecast.
  • How much funding will be available for the entire country?
    • This information is not readily available.
  • What is the turnaround time on this SBA loan application?
    • It will take 2-3 weeks to process the application and at least 30 days to issue cash to the applicant. Per the SBA, the process should not take anywhere near 90 days (as of 3/23/2020).
  • What qualifies as a small business?
    • Your business size is determined by the SBA by NAICS code, refer to the full table here.
  • Do you have to aggregate other commonly controlled businesses?
    • For common controlled groups, the SBA is only focusing on the stand-alone business that is applying for the loan at this time. However when calculating debt/equity ratios, they will likely look at everything that belongs to the business owner(s) which could make or break the application.
  • Will personal guarantees be required?
    • Personal guarantees are required if requesting $25,000  of financing or more (as of 3/22/2020).
  • Are tax returns required?
    • No tax returns are required at this time; the SBA is trying to streamline this process (as of 3/22/2020).
  • What can these loans be used for?
    • These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses without credit available elsewhere; businesses with credit available elsewhere may not be eligible for these or may obtain these loans a higher interest rate. The interest rate for non-profits is 2.75%.
  • How big is the potential facility?
    • SBA’s Economic Injury Disaster Loans offer up to $2 million in assistance and can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.
  • What are the terms of the loan?
    • SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.
  • Are 501(c) entities eligible for SBA Economic Recovery Loans?
    • 501(c)(3) entities are eligible to apply for SBA Economic Recovery Loans at a rate of 2.75% . As of March 24, 2020, only 501(c)(3) entities are currently eligible for SBA products. The American Society of Association Executives submitted a letter to Secretary Mnuchin, Speaker Pelosi and Leaders McConnell, Schumer and McCarthy asking the SBA to support all 501(c) entities.
  • If I can qualify for financing elsewhere, am I still eligible for this program?
    • If an applicant is able to get disaster financing from another source, the SBA could deny the application or apply an interest rate higher than 3.75% for small business owners or 2.75% for non-profits.
  • What is the process for applying for this loan?
    • Refer to the SBA three step loan application process here.
  • When should I reach out to discuss options?
    • Reach out to Aronson and your other professional service partners (e.g bank, attorney) right away.
  • Should I call my bank about this program?
    • A call to your banker is prudent. The bank is most likely educated about this program and may have additional financing ideas.
    • At this time the banks cannot submit a request for these programs on your behalf.
    • Your bank may be able to talk to you about additional SBA programs they currently support.
  • How do I know if my bank partners with the SBA?”
    • Contact your bank to determine if they work with the SBA
    • Certain banks are known as “preferred lenders” – The SBA defines this as follows:
    • Under the Preferred Lenders program, the SBA gives select lenders more authority to process, close, service, and liquidate SBA-guaranteed loans. An SBA field office serving the area in which a lender’s office is located can nominate the lender, or the lender can ask a field office to consider it for preferred status.
    • In making its decision, the SBA considers whether the lender:
      • Has the ability to process, close, service and liquidate loans
      • Has the ability to develop and analyze complete loan packages
      • Has satisfactory SBA performance
  • If I cannot make payroll, what are my options?
    • Contact your legal counsel to ensure adherence to all local, state and federal laws.
  • How do I contact the SBA?
    • Reach out to your bank and see how they partner with the SBA.
    • For additional information, please contact the SBA disaster assistance customer service center. Call 1-800-659-2955 (TTY: 1-800-877-8339) or e-mail.
    • The SBA recently launched a COVID-19 page covering challenges for small business, disaster loans, etc. Find more information here.

Our team will continue to monitor this situation and keep you informed about any relevant updates regarding SBA Disaster Loans. If you have additional questions or concerns, please contact Kyle McQuighan at 240.364.2644. For help guiding your business through the coronavirus outbreak, visit our COVID-19 resource hub.